Key Factors For Determining Property Value

Buying Selling

So, you found the house you like, but how do you determine how much it’s really worth? The more you can learn about similar properties, the better you can determine your new home’s property value. Here are two main methods that can help you determine property values: cost per square foot and comparable sales.

Let’s take a closer look:

Determining Property Value: Cost Per Square Foot

Cost per square foot is a common method used to determine a home’s property value. It helps to compare properties that have a variety of differences or for any properties that are being sold at different prices.

To calculate the cost per square foot, divide the sale price of the house by the number of square feet: price/square feet.

For example, if the house you’re looking at has an asking price of $100,000 and has 1,200 square feet, divide $100,000 by 1,200, which makes the cost of that house per square foot $83.33. It’s worth noting that a single-story house may be higher than a two-story house with the same square footage. Why? Although a two-story home may have the same square footage, it may be located on a much smaller lot. The difference in price is the difference in land value.

Determining Property Value: Comparable Sales

Comparable sales, also known as comps, are the most commonly used method used to determine property values. It compares similar features between homes of similar size, value, age and location to allow buyers to better determine the true property value of the home they’re looking to purchase.

Comping Properties? Consider These Four Key Factors

When comping properties, many factors come into play, but four stand out including location, size (square footage), number of bathrooms and bedrooms as well as condition of the house. Professional appraises are going to consider many more details to offer you a “true” value, but these four are a good starting point to give you an idea of the value of the property you’re researching. Plus, they’re easy to understand and easy to find.

1. Location.

You’ve probably heard the top three things to consider when buying a home are: location, location, location! There’s no question that location is extremely important; when comparing properties, consider only homes within the same neighborhood or at least a quarter to half-mile radius.

Remember, you can fix a fixer-upper…but you can’t fix a location. If the home is in a bad location today, it will be in that same bad location tomorrow.

2. Size.

When comparing a property, use other home with no more than 20 percent more or less in square footage than the target property. The closer in size, the better your comparison will be. If you can’t find anything of similar size nearby, use the cost per square foot method above.

3. Number of Bathrooms and Bedrooms.

The number of bathrooms and bedrooms, as well as where they are located, is extremely important. For example, at least one bedroom on the main level is highly sought after; the basement…not so good. Three bedroom homes are typically more valued than two-bedroom homes as more families and couples are looking for extra space. Similarly, having two bathrooms is a big bonus over one bath.

4. Condition.

Even if the numbers above look good on paper, be prepared for any surprises upon inspection. During the walk-through, consider the age and condition of the appliances, roof, carpet and paint as well as how well the other homes in the neighborhood are maintained.

Additional Factors to Consider When Determining Property Value

As mentioned, there are other factors than cost per square foot and comparable sales that affect the value of a home, but they will be more difficult to address without an agent. When looking through comps, a professional real estate agent will compare the following (and more):

1. Distance.

If you’re looking in an area with little market activity or are looking in a rural area, using comparable properties from farther away than a quarter-mile radius may be necessary.

2. Date of Sale.

An agent will use recent home sales, typically ones that have taken place within the last six months to a year.

3. Construction.

The construction of a home can influence the comps of a home. For example, if a house is all brick, they’ll use comps that are all brick.

4. Condition. 

Even when all factors are similar, a house that has been kept in poor condition will obviously have a lower value than one that has been properly maintained.

5. Age.

Where possible, agents will use comps that are in the same age (within three years older or younger) as your property. It’s worth noting that a rehabbed property does not have the same value as a new one.

6. Lot Size and Square Footage.

Agents will make comparisons with homes on similar size lots and with similar square footage. Square footage is determined by the amount of heated square feet. Garages and unheated attics or basements do not count in the square footage comps.

7. Floors.

Properties with the same number of floors will be used to compare to your property.

8. Basement and Garage.

Comps will be pulled to compare other homes that have a basement or garage. If a property is on a crawl space or slap, similar comps will be used.

9. Market Time.

Consider how long the property has been on the market. A long market time may indicate an overpriced property indicating an eager seller or one who may not be willing to budge on the asking price.

10. The Why.

Sometimes you can find out why they are selling the home. If it’s because of a transfer, for example, they may be motivated and ready to move soon.


The more similarities between properties, the easier it will be to compare the property you’re looking to purchase. It can be difficult to find properties that are alike, but the more you can learn about similar properties in your area, the better you’ll be able to determine property value.

Use a trusted real estate agent to help you find out everything you need to know before you make an offer.